Independent financial advisers shake up fund management in Spain

By: Patrick Blum | 01 Nov 2011

It’s not quite a revolution but the arrival of independent financial advisers is shaking up old habits among Spanish investors and fund managers.

The advisers, known by the acronym of EAFIs, were authorised two years ago but have taken off in the past year with the number of registered advisory companies now at 80, according to ASEAFI, their association.

Alvaro Chocano, recently appointed to promote the association, says more than 200 companies have applied to the CNVM, Spain’s market regulator, to be registered as independent advisers. The process takes time as the regulator closely scrutinises each applicant.

Investor interest in independent advice has grown partly as a result of the financial crisis, but it has also been boosted by demand for more diversified financial products.

“People in the past did not pay a lot of attention. There was a boom, things were going well, but now you have to be more efficient with your wealth and investors pay much more attention and that’s the biggest change,” says Mauro Lorán, regional director Iberia and Latin America at Ignis Asset Management in Madrid.

In bad times investors can become frustrated with their financial services providers as they face losses or plummeting returns on their investments. They become more receptive to new ideas and that has helped to open the door for the new advisers, he says.

EAFIs are still an embryonic sector. “It’s a relatively new development. They started a year ago, and they are the ones who are hunting the clients from the big banks. Their selling proposition is that they are independent. ‘I’m not going to sell you only my funds, I’ll take more care of you’, that’s the message they push,” says Lorán.

Banks dominate

Until now the financial sector has been dominated by powerful banks and a strong bank culture with investors trusting the institution’s advisers and officials. The new advisers are challenging that culture by providing paid for independent advice that is not tied to an institution.

About 90% of the fund management market is through banks and savings banks, most of which have specialised subsidiaries as well as a wide network of branches through which to distribute their own or third party products.

Large banks like Banco Santander and BBVA say they have an open architecture that allows them to offer their clients a wide range of investment choices, but this is more of “a guided architecture”, says Schroders’ Carla Bergareche, general director for Spain and Portugal.

“There are not many banks that actually sell foreign funds in their branches,” she says. Most banks don’t sell third party products directly in the branches.

The new advisers will help provide a new perspective for investors and she believes their number will grow and have a positive influence in the market, enhancing transparency.